Self Help Groups UPSC Notes: Objectives, Need, Features, Functions & More

A self help group (SHG) is a voluntary association of individuals who come together to address common problems, improve their social and economic conditions, and support each other. SHGs provide a platform for members to pool their savings, access credit facilities, engage in income-generating activities. It also helps them enhance their skills through training and empower themselves through collective decision-making. These groups primarily focus on empowering marginalized sections of society, particularly women.

The topic of self help groups UPSC is important for the General Studies Paper 2 (GS Paper 2) of the UPSC examination. This paper covers topics related to governance, social justice, and welfare schemes.

In this article, we will study the self help group meaning, objectives, functioning, and impact of self-help groups in India as needed for the UPSC exam.

What is Self Help Group (SHG)?

A group of 10-20 people in a locality which is formed for any social and economical purpose are termed as self help group. The main purpose of most of the SHGs is to provide better financial security among its members. SHGs can be formed with or without registration under government.

History of Self Help Groups

The functioning of Self Help Groups began in India in 1970 with the formation of the Self-Employed Women’s Association (SEWA). Since its inception in 1992, NABARD’s Self Help Group Bank Linkage Programme has grown to become the world’s largest microfinance initiative.

SHGs have been able to open savings accounts with NABARD and the RBI since 1993. This action boosted the SHG movement and laid the groundwork for the SHG-Bank connection program. The Indian government started the Swarn Jayanti Gram Swarozgar Yojana (SGSY) in 1999 to promote self-employment in rural areas by developing and skilling SHGs.

The National Rural Livelihoods Mission (NRLM), the world’s largest poverty reduction campaign, was founded in 2011 when the program expanded into a statewide movement. SRLMs (State Rural Livelihood Missions) are already operational in 29 states and five territories across the country (except Delhi and Chandigarh). NRLM provides low-cost, dependable financial services to the poor, including financial literacy, bank accounts, savings, credit, insurance, remittance, pensions, and financial services counseling.

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Need for Self Help Groups (SHG)

Some of the common and important need for Self Help Groups (SHG) are listed below:

In our country the major reason behind poverty is low access to credit and financial services for poor people. The Self Help Groups (SHG) committee was formed under the chairmanship of Dr. C. Rangarajan. Under this committee a comprehensive report was prepared on ‘Financial Inclusion in the Country.’

This report had identified four major reasons for lack of financial inclusion:

• Inability to provide collateral security
• Poor credit absorption capacity
• Inadequate reach of the institutions
• Weak community network

By this, in villages the existence of sound community networks are easily recognised as one of the major elements of credit linkage in the rural areas.

The role of Self Help Groups in poverty alleviation and in building social capital among the poor mainly among the women is extremely crucial.

Learn about the Role of women organisation here.

Objectives of Self Help Groups

Self-help groups aim to reduce poverty by providing financial services, income-generating activities, and access to livelihood opportunities. They focus on empowering women by enhancing their social and economic status, promoting gender equality, and providing a platform for collective action. Self-help groups promote financial inclusion by providing access to savings, credit, and banking services to marginalized communities. They aim to enhance the skills and capabilities of members through training, capacity-building programs, and knowledge sharing. Self-help groups foster social cohesion by creating a sense of community, promoting mutual support, and encouraging collective decision-making.

Features of Self Help Groups

Self-help groups are formed by individuals voluntarily coming together for a common purpose. A typical self help group usually has 10-20 members, and has an informal organizational structure. Members pool their savings to create a common fund, which is then used for providing credit to members in need. Self-help groups foster a sense of mutual trust, cooperation, and support among members. They promote skill development and capacity building among members through training and workshops. Self-help groups aim to empower members by providing access to financial resources, livelihood opportunities, and decision-making power.

Learn about the Elimination of violence against Women here.

Types of Self Help Groups

• Non-government organizations (NGOs) (NGOs)
• Poverty-reduction programs implemented by the government
• Banks that provide microfinance, both state and private institutions
• SHG Federations are groups of SHGs that work together to achieve a common goal
• SHG/Entrepreneurship Leaders

Functions of Self Help Groups (SHGs)

The major function of the Self Help Groups (SHG) is to build functional capacity of the poor along with providing employment and activities by which they can generate income.

• It believes in solving the issue by collective leadership and mutual discussion.
• It also gives collateral free loans with terms and conditions decided by the group at the market driven rates.
• These groups act like a collective guarantee system for members who want to borrow loans from authorised sources. For this poor do savings at the bank and in return they get easy access for the loan from the bank on a very minimal interest by which they can start their small business.
• By all these regular and constant efforts Self Help Groups (SHG) emerged as the most trustable and effective mechanism for delivery of microfinance services to the poor.

Learn about the Role of Women in Public Life here.

Self Help Group List

The following are some of the Self Help Groups in India:

Self-Employed Women's Association (SEWA)

SEWA is a prominent self help group in India that focuses on empowering women in the informal sector. It provides various support services, including access to finance, skill development, and advocacy for the rights of women workers.

Kudumbashree Mission

Kudumbashree Mission is a poverty eradication and women empowerment program in Kerala. It aims to mobilize women into self help groups, provide them with livelihood opportunities, and enhance their social and economic status through entrepreneurship and community development initiatives.

Mahila Arthik Vikas Mahamandal (MAVIM)

MAVIM is a Maharashtra-based organization that promotes women's economic empowerment through self help groups. It offers financial assistance, capacity-building programs, and market linkages to women entrepreneurs, enabling them to start and sustain their businesses.

National Rural Livelihoods Mission (NRLM)

NRLM is a flagship program of the Ministry of Rural Development, Government of India. It focuses on poverty reduction by promoting self help groups and facilitating their access to financial services, livelihood opportunities, and social empowerment through a community-driven approach.

Swarnajayanti Gram Swarozgar Yojana (SGSY)

SGSY was a government scheme aimed at providing sustainable livelihoods to rural households below the poverty line. It supported the formation of self help groups, skill development, and credit facilities to promote entrepreneurship and income generation in rural areas.

National Bank for Agriculture and Rural Development (NABARD)

NABARD is a development financial institution that plays a crucial role in supporting self help groups and rural development in India. It provides financial assistance, refinancing, capacity building, and technical support to self help groups and promotes rural entrepreneurship and agricultural development.

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Opportunities Created by SHGs

Some of the common opportunities which are provided by Self Help Groups are listed below:

• They are always providing instrumental opportunities in rural poverty alleviation.
• By providing economic empowerment they bring confidence among people to participate in decision making affairs at the household-level as well as at the community-level.
• Under different Self Help Groups initiatives un-utilised and underutilised resources of the community can be mobilised in a very effective way.
• Those leaders and members who are successful and have potential also in SHG there these persons act as a resource person for different community developmental initiatives.
• Person who is actively involved in different Self Help Groups initiatives helps them to grow leadership-skills.
• As per data it is proved that often women Self Help Groups leaders are chosen as potential candidates for Panchayat Pradhans or representatives to Panchayati Raj Institution (PRI).

Read the article on the Position of Women in Medieval India!

Importance of Self Help Groups (SHG)

Some of the common advantages of self help groups are listed below:

• Social integrity: It encourages people to put collective efforts to overcome various wrong practices like dowry, alcoholism etc.
• Gender Equity: It gives empowerment to needy women and develops the skill of leadership among them and this committee also empowers women to do active participation in gram sabha and elections. As per different prepared data in the country or across the country shows that after the formation of a Self Help Group there are multiplier effects in improving women’s position in society as well as in the family leading to improvement in their socio-economic condition and also enhances their self confidence.
• Pressure Groups: They are highly active in the government process which enables them to highlight major issues of society like dowry, alcoholism, the menace of open defecation, primary health care etc and impact policy decisions.
• Voice to marginalized section: As most of government policies which are for poor and weaker sections but they are not getting their benefits. In that case Self Help Groups makes sure that each beneficiary should get this in a regular way.
• Financial Inclusion: A typical self help group usually has a direct linkage with NABARD. This has made access to credit very easy and reduced the dependence of the poor section on traditional money lenders and other non-institutional sources.
• Alternate source of employment: This committee has decreased dependency of poor people on agriculture by supporting them in setting up micro-enterprises e.g. personalised business ventures like tailoring, grocery, and tool repair shops.
• Changes In Consumption Pattern: This score has made people educated about the importance of educating their children more along with importance of food and health than non-client households.
• Impact on Housing & Health: The financial support which is provided by Self Help Groups helps in reducing child mortality rate, improved maternal health and also boosting immunity to combat disease through better nutrition, housing and health mainly among women and childrens.
• Banking literacy: They also encourage and motivate people to save a certain amount of money and to do savings at the bank so that in case of need they can get loans.

Impact of SHGs

The SHG initiative has reduced dependency on non-institutional sources like informal money lenders. Participating families have been able to spend more on education than non-participating families. The program’s participants reported higher attendance and lower dropout rates. Lower child mortality, enhanced maternal health, and the poor’s ability to combat disease through improved nutrition, housing, and health – particularly among women and children – have all resulted from SHG-acquired financial inclusion.

Read the article on the Women’s Organisations in British India!

Government Initiatives to Promote SHGs

Based on the recommendations of the SK Kalia Committee, NABARD launched the SHG-Bank Linkage Programme in 1992 to integrate the unorganized sector with the formal banking system. Under this effort, banks were authorized to open savings accounts for Self-Help Groups (SHGs). Banks lend to SHGs on the basis of a collective guarantee, and the loan amount may be several times the SHGs’ bank deposits.

SHG has been selected by the Indian government as a priority sector for banks to work on. Members of SHGs in the following categories are eligible for priority sector advances for bank financing: agricultural, micro, small, and medium enterprises, social infrastructure, and others.

DAY-NRLM is the acronym for Deendayal Antodaya Yojana – National Rural Livelihoods Mission. Its goal is to alleviate poverty in rural areas by developing long-term poor community institutions. The Mission works together with the Department of Financial Services (DFS), the Reserve Bank of India (RBI), and the Indian Bank Associations to provide bank loans to SHGs (IBA). The DAY-NRLM Mission has been implementing the Mahila Kisan Sashaktikaran Pariyojana to develop agro-ecological approaches that increase women farmers’ income and reduce their input costs and risks (MKSP).

The Rashtriya Mahila Kosh (RMK) was created in March 1993 by the Indian government as an autonomous entity under the Societies Registration Act, 1860, under the Department (now Ministry) of Women and Child Development. The goal was to make credit more accessible to low-income women so that they could improve their socioeconomic situation.

Key Takeaways for UPSC Aspirants Definition and Concept: SHGs are small, informal groups formed for mutual financial and social support, typically consisting of 10-20 members from similar socio-economic backgrounds. Formation and Structure: Members pool their savings to create a common fund and provide loans to members for various purposes. Role in Financial Inclusion: SHGs enhance access to credit and financial services for the underserved and establish linkages with formal financial institutions. Government Support and Schemes: Supported under the National Rural Livelihood Mission (NRLM) and the SHG-Bank Linkage Programme for banking services access. Women Empowerment: SHGs significantly promote women's financial independence, skill development, and entrepreneurship. Microfinance: SHGs serve as microfinance intermediaries, offering lower interest rates compared to traditional money lenders. Social Impact: SHGs empower members by improving social status and decision-making power, while promoting collective action and solidarity. Challenges and Opportunities: Issues include the need for better training, capacity building, and market linkages, with opportunities in digital financial inclusion and innovative products.

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